tific disciplines, undergraduate enrollments in engineer- 

 ing and computer science have been increasing, and ap- 

 plications for admission to programs in those fields are 

 projected to increase. However, unless current faculty 

 recruitment problems are resolved, university engineer- 

 ing and computer science departments may not be able to 

 maintain enrollments at a level sufficient to continue to 

 meet anticipated demand at the bachelor's degree level. In 

 addition, the lack of sufficient numbers of qualified fac- 

 ulty members, coupled with the growing obsolescence of 

 instruments and facilities, could have a negative effect on 

 basic engineering research in the country (pp. 8-10). A 

 similar problem appears to be developing in medical 

 science as a diminishing proportion of young physicians 

 opt for careers in research and teaching. That trend has 

 akeady led to vacancies on several medical school fac- 

 ulties (p. 49). 



INDUSTRIAL RESEARCH 



Approximately 70 percent of all R&D in the United States 

 is conducted by private industry. During the next 5 years a 

 good deal of industrial research is expected to focus on 

 improving energy efficiency in processing and on increas- 

 ing productivity through automation, with the relative 

 importance of those concerns differing among industries 

 and among firms within industries (pp. 10-12). 



Since the mid-1960s there has been a shift away from 

 investments in long-range research in several key U.S. 

 industries, a factor that may have contributed to the ero- 

 sion of U.S. leadership in certain technological areas. 

 Industrial investments in long-range exploratory research 

 during the next 5 years will almost certainly depend 

 heavily on the severity of foreign competition, the general 

 economic situation, and the likelihood that the legal and 

 regulatory climate will not unduly impede the commer- 

 cialization of results of R&D activities. Changes in U.S. 

 tax laws during 1981 were designed in part to stimulate 

 increased industrial investments in long-range R&D. In- 

 dustrial laboratories are also likely to seek to strengthen 

 their links to other components of the U.S. research 

 system, particularly universities (pp. 10-12). 



CONTRIBUTIONS OF SCIENCE AND 

 TECHNOLOGY TO INDUSTRIAL INNOVATION, 

 PRODUCTIVITY, AND ECONOMIC GROWTH 



During the 1970s, the growth rate of American industrial 

 productivity lagged behind that of other industrialized 

 countries, including France, West Germany, and Japan. In 

 addition, the rate of industrial innovation in the United 

 States also appears to have lagged relative to those coun- 

 tries. Total industrial R&D investments in those countries 

 are also increasing faster than in the United States. 



CONTRIBUTIONS OF SCIENCE AND TECHNOLOGY 



A number of factors influence industrial innovation, pro- 

 ductivity, and economic growth. Research and develop- 

 ment activities are among the more important, since they 

 underlie the innovation process and provide many of the 

 tools needed for increasing productivity. Productivity 

 growth also appears to be related to long-term investments 

 in basic research; American industries with high ratios of 

 R&D investments to sales have consistently experienced 

 substantially higher productivity growth rates than other 

 industries. There is no evidence of any diminution in the 

 innovative capacity of U.S. scientists and engineers. 

 Rather, low rates of productivity growth in some indus- 

 tries may derive from a failure to make sufficient use of 

 R&D results (pp. 12-16). 



Productivity can also be improved by incorporating 

 existing innovations into industrial processes and through 

 the successful application of organizational behavior data, 

 as Japan has demonstrated in the automotive and consum- 

 er electronics industries. Additionally, technological in- 

 novations based on the results of R&D activities can lead 

 to improvements in the quality as opposed to the quantity 

 of goods and services, although such qualitative improve- 

 ments are not easily translated into measures of productiv- 

 ity changes (pp. 12-16). 



INDUSTRIAL R&D INVESTMENTS 



While total real dollar outlays for R&D by private industry 

 have increased substantially since 1975, there has also 

 been a marked shift away from long-term exploratory 

 research toward short-term problem solving in several key 

 industries. Factors beyond the control of industry can 

 discourage long-term R&D investments. They include 

 generally high inflation and interest rates, escalating ener- 

 gy costs. Federal tax and patent policies, and Federal 

 regulations that encourage short-term defensive research 

 and lead to uncertainties about the future marketability of 

 R&D results (pp. 13-15). 



The shift away from long-term investments and the 

 failure to capitalize on existing innovations in some indus- 

 tries may also be related to internal management prac- 

 tices, to recruitment procedures that select managers on 

 the basis of business skills rather than technical com- 

 prehension, and to a reward system that emphasizes real- 

 izing short-term profits rather than investing in long-range 

 innovative potential (p. 15). 



THE FEDERAL ROLE 



During the next 5 years, the Federal Government is ex- 

 pected to focus on indirect means of encouraging private 

 industry to increase its long-term research investments 

 and on improving the climate for commercializing the 

 results of its R&D activities. In addition to improving the 



XI 



